Table of Contents - How to Attract Investors, Establish Credibility, and Fund Deals with Hunter Thompson
Dave Debeau [00:00:09] Hey, everyone, this is Dave Debeau with another episode of the Property Profits Real Estate podcast. Today, it is my pleasure to be interviewing a fellow raising capital fanatic, Mr. Hunter Thompson. I believe you're calling in all the way from Los Angeles, California. Is that correct?
Hunter Thompson [00:00:27] Yeah, that's right. Thanks again for having me on.
Dave Debeau [00:00:28] My pleasure. So if you aren't familiar with Hunter is a professional real estate entrepreneur and doing a lot with raising capital. Over the years, he's raised well over believe it's over 30 million dollars in private capital for his deals, primarily commercial deals, if I'm not mistaken. And he's also an author who wrote the book, Raising Capital for Real Estate How to Attract Investors, Establish Credibility and Fund Deals. I love the title of that book. That's fantastic. He also runs a podcast and does all sorts of great things. So great to have you on the call here today. And let's get things started off with the first question. How did you get into this whole crazy world of real estate investing in the first place?
Hunter Thompson [00:01:09] Yeah, you know, this is something that I really enjoy talking about because I think it's counterintuitive. I think a lot of people, when they tell their story about real estate, it starts with two thousand eight at the same is true for me, but it was kind of like the inverse of that. I was really insulated from what happened in twenty eight because I was still in college. And so when two thousand eight happened, I had been studying economics. I was very interested in the financial sector, so I saw it as a massive opportunity. I really didn't get wiped out. It was like, OK, blood is in the streets. Now is a good time to focus on this asset class, just financial markets in general. And so I started studying the stock market, reading Charlie Munger, Warren Buffett, et cetera, start investing in stocks, value based investing, start to see success there, as most investors did if they started twenty eight. And it really wasn't until 2010 that I kind of had my last strong moment. This is something that I don't hear people talk about. But for me it was my very, very clear moment in my background, which was the impact that the European debt crisis had on the US markets. I had been obsessing over the capital markets. I had been reading everything that was available to me, spending hundreds of thousands of hours learning, investing, learning, investing. And then all of a sudden, out of nowhere, everyone on CNBC is talking about the Greece bond yields and how the Greece bond yields go above seven percent. The S&P five hundred is going to collapse. And if we went below seven percent, the S&P 500 was going to be fine. And this was happening every single day is calling intraday swings of the Dow Jones of six hundred point seven points. And just remember thinking, what am I doing? I spent all this time researching and I never read anything about something as obscure and unmitigated and unpredictable as the Greece bond yields. I've got to find something that's simplistic enough that I can actually conduct due diligence and mitigate some of those risks that quickly led me to real estate.
Dave Debeau [00:02:59] Yeah, so it's all about getting a little bit of control over your investment, right. Instead of being just held in the wind there by the. Yeah, it's a good point. I mean, I don't understand the markets anywhere near as well as you do, but yeah. Just that idea of something that far away in a country that small affecting the rest of the world so much, it's mind boggling. So, OK, exactly. So you decide, OK, real estate's what I want to do. How did you get started? What did you get started in?
Hunter Thompson [00:03:27] Well, I was very fortunate in terms of the timing, right. Not only in terms of where the market was, which is obviously historically significant. But I also moved to California, not necessarily related to real estate, just I felt that's where the opportunity was and California in particular had been decimated. So what happened was there was two things. The valuations were low. Yes. But also when I started going out to networking events, trying to build my relationships, I was able to network with some very high caliber people very quickly because there they were, the ones that were able to overcome this. They were the ones that were able to keep their shirt during this massive collapse. And so the foundation of my perspective on investing was forged through those individuals that I later would come to find out where some very influential investors and I was introduced to the world of syndications very, very quickly. That's not typically how most people get into real estate. Typically, it's you know, I bought a thirty thousand dollar house. I bought a fifty thousand dollar house that rented for five hundred dollars a month. And then maybe you work your way up to commercial if you're interested in pursuing that professionally. For me, I was introduced into the world of passive investing through syndications very, very quickly on. And once I understood the vehicle from my perspective, I was thinking, OK, the return profile is somewhat similar. I get to be diversified across multiple different asset classes across the country and I get to depend on someone else's time, energy and expertize I'm going to do this a lot. And that's really how I built my business. Now, back then, the word syndications wasn't a very common term. That was something that was typically were only people that were in high net worth circles. Use that terminology now because of the popularity of crowdfunding in particular. That's. Become a very intrepid vehicle, and I wouldn't say that I created that or anything like that, but I definitely was the benefactor of that rise in popularity.
Dave Debeau [00:05:18] OK, so for those folks that aren't familiar with who exactly what a syndication is, why don't you give us your definition of a syndication?
Hunter Thompson [00:05:25] Yeah. So the important part about investing in syndications is twofold. The first is rather than purchase one property, if I have one hundred thousand dollars rather than buy one one hundred thousand dollar property, I'll pull together my hundred thousand dollars with 10 other investors or so that each have one hundred thousand dollars. Cumulatively, we can buy into a much larger property than we would been able to individually. But the key here is that when you do that, you're able to invest in commercial assets that are much more complicated and those complexities lend itself so that your level of expertize you have an operator, there's a huge discrepancy between a mom and pop owner and a best in class owner that allows them to be compensated for the deal so that you can be just a passive investor. But they can make up for the fact that they're participating in the proceeds because they're bringing so much more to the table. And that's why I like syndications.
Dave Debeau [00:06:17] OK, so you found out it sounds like you found some really sharp mentors early on and they got you involved in the whole syndication idea. So and now we understand a little bit about what a syndication is. It's pulling together your money together with some other investors and getting into a much bigger deal than you probably could any one of you on your own. All right. And then working with somebody who really knows what the heck they're doing. So is that what you continue to do or are you so where do you where do you come in to the deal? Are you just a passive investor or are you creating syndications, finding investors and matching them up with operators?
Hunter Thompson [00:06:57] So when I started in the business, I started to have success, just my own personal portfolio. And I started to realize other people don't have access to deals like this. Also, they don't really necessarily have expertize in real estate. So at the beginning, I was just a passive investor and I was helping other people invest in deals that were similar to mine. But once the established a track record, I realized this is an opportunity for a business to be created. Here I have a highly curated list of operating partners that I've joint venture with over the years and I've invested with passively. And I have a due diligence process that's far above and beyond even what a savvy investor can create. And part of this is because of the economies of scale, especially as we start to scale the business going from five investors to ten to one hundreds. Now we have several hundred. It allowed us to write large checks and those large checks provide us access to a much greater level of due diligence in operating partners willing to take hundreds of hours to court us as a company. And they wouldn't typically allow that for an investor investing 50 or even half a million dollars. So that's really how our business was created. And we've been able to joint venture with institutional level sponsors and leverage their expertize. And I can think of something I like to do, which is communicate with investors, raise capital, and it's a really good symbiotic relationship like that.
Dave Debeau [00:08:13] Now, I know that sounds very, very cool. So tell us a little bit, because a lot of people watching or listening to this podcast are probably at the stage where they're starting to want to work with investor partners, raise capital perhaps for their own deals, but they don't have the faintest idea about how to go about doing that. So reach way back in your memory banks. And if you would, let's look back at those first two or three or four or five investor partners that you got on board with you. How did you find them? How did you present the opportunity to them? What does that process look like for you?
Hunter Thompson [00:08:47] Well, I'll tell a little bit of a story about kind of my first capital raise that I'll put things in perspective. This is not an easy job. Anyone that thinks that it's easy to raise capital hasn't raised a lot of capital. I mean, you can fall on your face pretty hard. Having said that, if you do it right, it can be the most lucrative, the most sought after, the most consistently needed skill in the entire real estate business. If you have the ability to consistently write seven figure checks or eight figure checks, you will always have a place in the commercial real estate world. It's unbelievable. And I think people are starting to get wind of that. Now, when I started in the business, like I said, I started investing for my own personal portfolio and built up a track record over a couple of years, realized that the investment thesis that I had in my mind at the time was really focused on the mobile home park business. It was working. And so I decided to kind of go out one sphere of influence away from my intimate friends and family and my immediate family, like their cousins, their aunts, maybe their plus ones or plus twos. And I threw a luncheon only for accredited investors where I was going to talk about the mobile home park business. And then there's going to be an opportunity to invest. I was very excited. 30 people came. There was at least 30 million dollars of net worth in this place. My goal was to raise half a million dollars. And I agreed with my operating partner, don't worry, it's going to be no less than half a million. And he even a. Allow me to go up to a million at the times, we had a lot of flexibility there was very knowledgeable about the asset class, was so excited about it. I mean, I'm sure some of your listeners are familiar with why the mobile home park business is so compelling. But this my opinion is just nothing like it. It's still really fascinating. But the time it was even more compelling went through all this and then at the end passed out a piece of paper where the investors could write down how much they're interested in investing and raised a total of zero dollars in a room of 30 million. Wow. So what happened is devastated. Yeah, I would. I mean, basically, I'd already committed to be a real estate investor, already committed to be an entrepreneur. I told people that I was confident was going to raise this half a million dollars. And I realized I had thought about this whole process incorrectly. I thought about me going out to my doctor, going out to my aunt, going out to my cousin who owns a franchise and trying to convert them into real estate investors over a 30 minute lunch in. What I needed to do is create an infrastructure to attract the right investors, build a scalable infrastructure that was able to nurture them through content creation, article creation interviews that I had done so that I was getting people that were already along that same line of thinking. These people didn't care about investing in real estate. They weren't even interested in the mobile home park business, no matter what the returns were something I talk about in the book. If I came to you and said, look, I have an amazing deal on dairy cows, they're 40 cents on the dollar and they're twice as efficient as the normal dairy cows. It doesn't matter how good the deal is, you're not a dairy farmer, so you don't care. And that's exactly what was going on there. So that's what the book is about to reversing that flow. I don't want to go around hunting for investors. I want them to come to me. And the ones that come to me are going to take my business from those twenty five thousand dollar investments to close half a million dollar investments. And that's exactly what's happened.
Dave Debeau [00:12:00] Nice. All right. So a question I've got for you, because, again, a lot I'm up in Canada, a lot of our listeners are from Canada. Things are a little different up here than in the States, but very similar. We got the securities commissions here. You've got the Trade Commission in the States. So how do you stay on the right side of that and not get into trouble and or jail?
Hunter Thompson [00:12:22] You know, that's a really good point. And it's interesting. So I'm not very well versed in Canadian law, but when it comes to the United States, there's so many nuances that it's just very, very challenging. I mean, one of the reasons the business is so lucrative is because a ton of people look at it and go, no, thanks, I'm going to go start an ice cream shop. I mean, anything besides dealing with the SEC in the United States, but no one always have a really good attorney, especially we're going to put something on paper like write a book. It has to be ironclad for me. I'll give your listeners a little bit of advice. And this is just my perspective. I have found that there's two main ways to raise capital in terms of the offerings that you do. There's a five or six B, which requires that you have a preexisting relationship with someone prior to raising capital with them directly and five or six C, which allows you to quote, publicly solicit. You can actually talk about the details of a deal publicly, but there's an extra level of scrutiny which requires that each investor have a third party verification, that they are in fact accredited with the five or 60. They can just knock a little box that says they are. Now, the difference between those two may seem insignificant, but from my perspective, especially because I have a podcast, I had become a huge advocate of the five or six key thing. And I think that as the millennials start to be more comfortable investing in people that they've met over the Internet and as millennials start to become a higher percentage than become high net worth investors, I think that this third party verification process is going to be very, very advantageous. And overcoming that hurdle, that third party verification hurdle is going to be smaller and smaller and smaller. So I'm a huge advocate of the five to succeed. And it's very it's not very popular. So I think in five years, if I had the opportunity to come on the show at that time, again, I think many more people will be on board with that. Right now, it only accounts for about seven percent of the business. I think that's going to invert over the next five years.
Dave Debeau [00:14:16] Yeah, makes a lot of sense. OK, very, very cool. So just out of curiosity, that very first luncheon that you put on sounded like it was going to be a home run. You got thirty people out there. So just how did you get thirty people out in the room to listen to you talk about Bowmont mobile home parks in the first place?
Hunter Thompson [00:14:36] Yeah, I mean, that's interesting, right? Because it doesn't matter how many people in the room, it's the wrong people in the room. And so just reaching out to family, friends, contacts, people that I knew that had a background in business, just savvy individuals that were accredited investors. I mean, this was a result of I had about three months to market for this. So what I did was I use this app still to this day, Eventbrite, to create an actual event and track our steps and handle communications. My opinion, I did a pretty good job with all that stuff. And also I'm confident in my ability to communicate something I'm passionate about. It just makes the lack of results even more pronounced. You know, in terms of sales, I have a background in being able to communicate, Cutco. I used to work for them when I was like in between high school and college.
Dave Debeau [00:15:20] I did that as well. That's fantastic
Hunter Thompson [00:15:22] experience. OK, yeah. And it's a really it's really great. You make your own schedule, etc.. But I just say that to say that I did have those skills. They just didn't. This is a different game. I'm not talking about selling three hundred dollar knives. I'm talking about give me one hundred grand for seven years. You do that, you have to create that infrastructure. And like, you know, as a host of a podcast, there's never been a better time to create a highly scalable, replicable infrastructure of content so that people can learn about you without it requiring your time. And this requires so much less time of your own that actually makes the business scalable. And for anyone that's interested in getting this space, if you just take the time to write ten articles of, well, whatever. Your business is about the time that you take to write the articles will pay for itself just because going through the content creation process will solidify your ability to understand your own business. So much so that even if no one ever read the articles, it's still a good way to spend your time. So I'm just a huge advocate of this.
Dave Debeau [00:16:23] I know it sounds good, but your time. Speaking of time, we're running out of it on this very short interview. Time flies when you're having fun, and especially when we're talking about raising capital. So fantastic information. Really appreciate that. I'm sure a lot of our listeners are going to want to find out more about you, what you do, and maybe how to get a hold of a copy of your book. So if they're interested in that, what would you like them to do?
Hunter Thompson [00:16:44] Well, first of all, I mean, thank you so much for allowing me to do this. My the podcast medium has been very beneficial to me and my business, but it requires people like you allow me to come on and share value and share content. So thank you again. You can find the book at Raising Capital for Real Estate dot com. And if you shoot me an email and info at raising capital for real estate, I will send you some free goodies. I'll probably send you a webinar presentation that we did. I'll send you everything we've done with an attorney about the topic of raising capital, at least in America. And I'll send you some good stuff. Awesome.
Dave Debeau [00:17:17] I highly recommend that if you're interested in raising capital that you take up on is opportunity the under? Thank you very much and and really appreciate it. Look forward to having a chat with you. Hopefully we don't have to wait five years. I'm sure there's a lot more that we can dove into on another interview, but it's been a lot of fun and a pleasure meeting you as well. Yeah, thanks again. I appreciate it. All right, everybody, take care and we'll talk to you on the next episode. Bye bye. Thanks very much for checking out the property profits podcast. And you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.